Why model discounts at redemption rate?

A 15% code that 40% of buyers use costs you 6% of revenue, not 15%. Costing discounts at face value makes genuinely profitable campaigns look unprofitable, which leads teams to cut things that were working.

My break-even looks impossibly high. What now?

That's the useful answer, uncomfortable as it is. The lever is rarely cheaper clicks — it's order value, conversion rate, margin, or repeat purchase rate. If none of those can move, the honest conclusion may be that paid acquisition doesn't work for that product.

Does this account for repeat purchases?

No — deliberately. This calculates first-order break-even, which is the conservative case. If you have meaningful repeat purchase behaviour, use the CAC payback calculator instead, which models the full customer relationship.

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What ROAS do you actually need?

A 3x ROAS on a 30% margin product loses money on every order. This calculates the floor from your real cost structure.

Your numbers

Average order value

Cost of goods

Shipping & fulfilment

Payment processing

Discounts redeemed

Cost at redemption rate, not face value — a 15% code used by 40% of buyers costs 6%.

Return rate

Your current ROAS

Blended across channels, from your own revenue figures where possible.

Break-even ROAS

2.38x

Below this, every order loses money.

Contribution per order

$37.75

Contribution margin

41.9%

Profit per order at 2.4x

$0.25

At 2.4x you're above the 2.38x floor — each order contributes roughly $0.25 toward fixed costs. Scaling spend here is a reasonable bet.

Calculated in your browser — nothing is sent anywhere, and nothing is stored.

How it works

The maths, so it isn't a black box.

It builds contribution margin first

Order value minus cost of goods, shipping and fulfilment, payment processing, discounts at redemption rate, and expected returns. What's left is what an order actually contributes.

Then inverts it

Break-even ROAS is simply 1 divided by contribution margin as a percentage of revenue. At 40% contribution, break-even is 2.5x — anything below that is buying revenue at a loss.

And prices your current position

Enter your actual blended ROAS and it shows profit or loss per order at that level, which is usually the number that changes the conversation internally.

Returns are modelled on the contribution

A returned order refunds revenue while most variable costs are already sunk, so returns are applied against contribution rather than against gross revenue.

Questions about this calculation

Blended, calculated from your own revenue figures divided by total ad spend. Platform-reported ROAS double-counts across channels and typically overstates by 30–60%, which would make this calculation optimistic in exactly the wrong direction.

Terms used here

Contribution Margin ROAS MER

Other calculators

CAC PaybackBlended CAC, payback period, and a horizon-capped LTV:CAC ratio.Conversion Lift ROIWhat a conversion rate improvement is worth versus buying the same revenue with ads.Media BudgetWork backwards from a revenue target to the ad spend it actually requires.Sample SizeFind how long a test must run before you're allowed to look at it.Creative VolumeFind out whether your creative output can outrun fatigue.Churn ImpactSee what a small churn improvement does to lifetime value and your bid ceiling.Shipping ThresholdFind a threshold that lifts order value without absorbing more shipping than it earns.In-House vs AgencyCompare a fully-loaded salary against a retainer, not just the headline numbers.Content Break-EvenFind the month a content programme repays what it cost to produce.Discount Break-EvenFind how much extra volume a discount must produce just to stand still.Pipeline ModelWork backwards from a revenue target to the leads and spend it implies.Holdout DesignerSize an incrementality test before you spend real revenue running it.

Where we do this work

Paid Ads E-commerce

Want us to run it properly

We'll build this model on your real data.

A free 30-minute teardown where we build your contribution margin model from actual figures and show you where the funnel leaks. Yours to keep either way.

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